Zoom Communications, Inc. (ZM) Earnings Call Transcript & Summary

Great. Hello, everyone. Thanks for joining the Zoom session of the virtual conference. It's off to a good start for all of you. I'm Dan Bartus from the enterprise software team. One of my areas of focus is communication software. So naturally, one of the hottest topics or areas I talk with investors about every day is all things Zoom there really is a time to talk about. So I'm very excited to have Zoom CFO, Kelly Steckelberg, with us today. Kelly, welcome. Thanks for joining us.

Thanks for having us, Daniel.

So Kelly, I want to start high level before digging into all the different exciting product areas that you go into today and where you can go in financials. So we'll try to not answer all of it with this first very broad question. But just to set the stage, as we potentially exit COVID soon, Zoom is seemingly everywhere already. So simply put, what drives growth from here? How should investors think about the balance between new customers versus expansion within the base that you already have?

So there's a couple of vectors to this. So first of all, we're really focused on moving from being this killer app that has supported people through the pandemic to being a platform where you spend your day. And the important parts of that platform include not only Zoom Meetings, of course, but also Zoom Phone, our cloud PBX solution, Zoom Rooms, which are going to play an increasingly important role as organizations start to think about how do they start migrating back towards the office and reopening things. Of course, there is Zoom Chat, which is an integral part of that as well. And then recently, we announced Zoom Events. And later this summer, we're going to have generally available Zoom Apps. So all of that plays a really important role in terms of becoming a space where you not only collaborate, but also you spend your day. Eric talked about it in terms of being kind of the operating system for your working day. And so you can start to think about that's the platform that Zoom is evolving to become. And then -- I think we want to talk a little bit about Global 2000 in a minute. But in terms of the new customers versus expansion, just pointing to a couple of things from our call last week. First of all, we announced our largest deal ever to date. So this idea of everybody has Zoom that needs Zoom is not really true or it's not really accurate in the sense that this large financial institution, this has been a multiyear deal that took to get done. And if you were interacting with them, you might have experience like, oh, they do have Zoom because there were parts of the organization that did have Zoom, but they were either individuals that were using in our credit card or departments, but the global deployment of this organization wasn't -- didn't come to fruition until recently. And so that's where I think there's a disconnect in terms of everybody that needs Zoom has Zoom. It's not absolutely the case. And we did see strong growth, both in new customers and expansion in existing customers in Q1. And then, of course, Zoom Phone was a really important part of the Q1 results as well.

Definitely. That's a great intro and a lot of areas to dig into there. So maybe the first one, just on this kind of penetration into your -- what looks like your base already, but investors have a tough time kind of figuring out how penetrated you are in those bigger customers. So maybe on the Global 2000, maybe we'll start there. Any metrics you can give us on the penetration in Global 2000? And how should we think about the room for growth within that cohort?

Yes, exactly. So when you look at the Global 2000, there's only 50% of the Global 2000 that are spending more than $100,000 a year with us. So $100,000 a year is a reasonable size deployment for an organization that is in the Global 2000. When you look at the Global 2000 and who is spending more than $1,000 a year with us, it's a much higher number. It's over 50%. So that shows you, back to the earlier example I was giving where, there might be organic usage in more of those companies, there might be a department using it and individuals using it. But in terms of really the opportunity for a significant sale, there's 85% of the Global 2000 that are still available to us. And so that's the opportunity that we continue to see ahead.

And we actually hosted a pretty lively bull/bear debate on the kind of the UCaaS space in general, but I think 80% of the time ended up being devoted to Zoom. It was also timely after your earnings last week. But a lot of the feedback I got afterwards from investors was just everyone is kind of struggling with the same metrics, trying to triangulate, what is user growth? And -- or what is the user count, and how can we factor that into growth? So are there any metrics you can point to that would help investors get a feel for what your user count for Meetings is today? And I'm curious why not break out the Zoom Meetings user count for investors?

So the metric that we disclose, of course, publicly is customers with greater than 10 employees. So it's not a user count. It is a customer count. And the customers with greater than 10 is in the proxy for the customers -- upmarket customers, you want to call it that, that are buying through our direct organization. And the reason that we've chosen to focus on -- and just as a reminder for everybody, that was in Q1, it was about 497,000 customers greater than 10 employees. And the reason that we've chosen that metric is because the actual user number for us is -- it's hard to give a unique user number because people often sign up for Zoom and they use it through their personal e-mail domain, they might use it through their work e-mail domain. And because we also have a significant number of free users. It's without sort of digging into the next level, I mean, we just get this user number. It might be a massive number that would have not a lot of value to it because there could be a significant number of duplicates in there. There's a different ratio of free to pay, that can vary from day-to-day even. And so that's why we've chosen not to disclose that user number, but rather give the customer count as we think that's a much more reliable and useful number for investors to have.

Makes sense. And of course, that customer count was a nice bright spot in the quarter as well. So switching gears a little bit, what kind of stuck with me after your earnings call was also how much you guys focused on Zoom Apps and what that can do for you guys going forward. Maybe you can just talk a little bit about the Zoom Apps strategy in general and the kind of innovation you're seeing on top of Zoom Apps already today?

Yes. So just as a quick reminder, what Zoom Apps are, Zoom Apps are apps that are being developed by third party and also a few being developed by Zoom as well. They'll be generally available later this summer. And they are apps that are really meant to augment and expand your in-meeting experience so that you can, for example, go to a Dropbox space by clicking on icon here within the meeting rather than having to go outside the meeting, navigate your browser and launch your workspace. That's the difference. We do have an existing app marketplace today that has about 1,000 apps in it already. Those are apps that are really built to have an augmented experience around your meeting. So think about something like a calendaring app, which helps calendar your meetings; or maybe something like Chorus.ai, which comes in after the fact to analyze the conversations that have happened in that meeting. So those are things that happen around the meeting versus Zoom Apps, which are going to happen in the meeting. And we're really excited, these are amazing companies that are developing these, if you think about like ServiceNow, Asana, Box, Dropbox. There are also some consumer apps being developed as well, including WW, which is Weight Watchers; and Thrive, which is Arianna Huffington's company. So again, those will get maybe generally available later this summer and really excited about how they continue to expand your Zoom experience.

And just to clarify, so you announced a recent -- I think $100 million fund for innovation on Zoom Apps. That would be focused on the latter technology that you discussed there, right?

That's exactly right. So the goal of the Zoom Apps Fund is to really encourage development and innovation around apps that continue to expand the in-meeting experience itself. And we had more than 400 applicants for investment. And our corp dev team is spending a lot of time, going through and evaluating those companies, and we're excited that we'll be announcing our first cohort of investments later this summer.

That's great. Yes, and the profit potential there is very exciting. So shifting gears just slightly. I want to ask about Chat. I feel like I don't ask you about it very often. And investors are very comfortable that you have great video meetings, obviously. Phone has really come of age, and you're doing exceptionally well with that product. So how does Chat fit into this? How do you feel about where you're at with Chat? I'm curious if Zoom Apps can help you actually innovate the Chat side of things, too. Maybe you can just talk about all things that are kind of relevant to point out with Chat today.

Yes. So we have an integrated Chat feature, which we've had forever. It comes with our Meetings product. And it is a strategically important product for us. It's come even more so with the growth of Zoom Phone. If you think about often the way that people -- the motion around a phone call is not just to pick up the phone any longer, it's really to chat someone in advance and say, "Hey, are you available?" And what's amazing about our Chat functionality is it's so integrated in the Meetings and with Phone that if you're chatting with someone, you can just one click launch into a meeting with them or one click launch into a phone call with them. So it becomes this seamless movement or seamless channels of communication that you can have with people. And it is an area of focus for us in terms of investment, and we'll continue to develop, I think. We use it extensively at Zoom, and it's really an amazing product in that I use Zoom Chat almost exclusively for internal communication and really only use e-mail for external communication. And it's a very efficient way of communicating. It's also the way internally in our company that we really share documents, it becomes a filing system. So it really has expansive functionality, but we are investing in as we -- we think it can continue to play a big role in the platform strategy.

Makes sense. And just a reminder to everyone listening, feel free to ping me with any questions. I'll try to get through them as we're going and save some time at the end here, too, to get to them. Maybe I'll continue on the product theme and work my way to Zoom Phone, which I'm sure we could fill 35 minutes talking about just that one product. So first, Zoom Rooms. Just curious, I think it's getting a little bit more attention as we look to reopen, companies are kind of thinking about how to bring employees back safely, but also manage a hybrid workforce. So can Zoom Rooms move the needle this fiscal year? I'm curious about your view as that as a stand-alone product and maybe you can get into the pricing there versus how much that just helps you with the stickiness on the video meeting side of the business.

Yes. I think, first of all, Zoom Rooms is a really important part of the strategy, especially in the upmarket and as organizations are thinking about reopening their offices. And I mean there's lots of questions still about what the future of work looks like exactly. However, I don't think anybody will contest that it's not likely going back to the way that it was before and that employers are going to provide some level of flexibility or hybrid wherever you want to call it their employees. So then that means creating an experience of supportive of those in the office and those outside the office. And that continues to evolve to video-enabled conference rooms. I don't think in the future, you're ever going to see a conference room that doesn't have some sort of video in it. Or if you do, that's not going to be a leverage conference room, because it's -- if you imagine, any meeting that you're going to join, you're likely going to have a mix of people that are in the office with you and employees working from other locations. And so that's where Zoom Rooms is a really important part of that strategy. Not only Zoom Rooms is an important part of strategy, but thinking about how do you -- we are thinking about how do we solve some of the questions that our customers have as they're thinking about reopening. One of the amazing things that's happened during this pandemic is the democratization of the communication. An experience like this, right, our squares are all the same size on the screen. The other advantage of a meeting like this is it creates another mode of communication or another channel of communication, which is that Chat that's going along with it. And the Chat is important, and it gives a voice to people that sometimes don't feel comfortable speaking up during the meeting. It creates an opportunity to do things like pulling or ask questions in more inclusive real-time way and a less disruptive way than trying to raise hands or go around the room and ask people to give an answer. And so then -- but how do you recreate that experience as you move people back into the office and you have some that are there and some that are not. And so we are working on things like Smart Gallery. Smart Gallery is the new feature, which by placing cameras around the conference room, we create this look of being in a meeting, even when some of the attendees are there and some are on devices from different locations. We are also creating something called companion mode, which allows you to walk into a conference room and join a meeting, but have your device with you and have your device logged into the meeting. And that would allow you to do things like respond to calls or maybe see information that's being shared on the screen, but it's way across the room, so it's difficult to see. But it allows you to join in companion mode, which automatically has the camera off, has the sound off, the audio off. So you don't have that terrible experience of turning it on and then the echo that's happening or maybe the camera is flashing it to you and you're up on the screen when you're in the room. And so really taking into account how you make all of those experiences really seamless and easy for people as they're -- again, we're going to be working in all different modes, I think, going forward and trying to find solutions that accommodate all of them.

That's great. Yes, it's impressive, all the innovation around Zoom Meetings. And that's just another example there. Have you guys thrown out any metrics on how to think about the TAM for Zoom Rooms? I don't know about number of conference rooms or just the dollar TAM to put you on the...

Daniel -- yes, the last time we did was at Analyst Day coming up on 2 years ago, I think. So you're raising a really good topic that it's probably something that we should put on the agenda for Analyst Day. Remember, everybody, Analyst Day will be aligned with Zoomtopia, which is September 13 and 14. It will be all completely virtual. So we would love to have you there. And I think that's one of the topics we can talk about then.

Yes. That's great. And then, so Zoom Phone, one of the areas of innovation, that's clearly getting a lot of attention from investors. There's some confusion out there. I talked to some people. They actually questioned what's the difference between doing just an audio meeting in Zoom Phone, and there's confusion around the technology. And I'm sure we have a mix of investors listening right now. So maybe first, just why should investors be excited about Zoom Phone? Why is that such an incremental innovation on top of Zoom Meetings?

Yes. I mean it is an interesting point, right? Like, we certainly believe that the future of communication is video. And so why would you need Zoom Phone? But the reality is you do. People want the ability -- so stepping back for a quick second. As a reminder, Zoom Phone, it utilizes the same voice over IP infrastructure that we have within our Zoom Meetings. So the same -- any of you that are joining today and elected to join via your computer, you're using the voice over IP technology. What Zoom Phone did was add on to the end of that the telephone number control, which gives you more opportunities to initiate a call in a different way rather than having to send a meeting invite to reach someone. You have their phone number, you can just call them, launch into a meeting that way. It makes it more accessible. And some organizations prefer that or want to make sure that they have both options. And what's amazing about Zoom Phone because it's completely portable. It also allows organizations to let their employees have a business phone number on their personal device. So rather than having to carry around 2 devices, you can have your cell phone number for personal use, but you could have your Zoom Phone number on there as well, which is what I do, for example. Or you can have it on your laptop. And so it's -- so very convenient. It's also -- there are still lots of organizations that have on-prem telephone solutions. And I asked a CIO recently, like, why is that, why is it sort of the last area that's been moved to the cloud? And his answer was really interesting, which was, it just -- it works, right? There are some servers sitting somewhere in a closet, nobody wants to touch it because you pretty much -- you take up your phone and there's a dial tone, and that's what matters. But over the last year, as organizations have experienced having thousands of phones sitting on desks that no one was using and realizing this could be a lot more strategic, a lot more convenient for their employees, they're now realizing this might be the impetus to get it into the cloud. And -- but if you're -- especially if you're a Zoom Meetings customer, doing it -- selecting Zoom Phone has even added advantages because that integration allows where additional features are going to get beyond having your meetings from one vendor in your phone from another, which are some of the things I just talked about, like the one click launch to elevate phone calls into Zoom Meetings or Chat, into Zoom Meetings with Chat into phone call. Like you only get that from having the integrated experience of buying it all from Zoom. So that's the advantage that I see. I think the long-term question over time is which -- how does this continue to evolve, but I think that the need for phone for many customers is still there, it's still real. And quickly around sort of why it's incremental revenue, the list price for Zoom Phone and Zoom Meetings are about the same. They're both around $15 per seat per month. And thus, by adding on a phone license, you have the opportunity -- we have the opportunity to almost double the revenue in an account.

It's a great overview of it. And I'm curious -- so I always tell people the other benefit, too, is the upsell opportunity for phone could be bigger. I'm sitting at Bank of America. Maybe we don't have 2 Zoom licenses, but we have 200,000 employees. And almost all of us have a phone number. So that ratio of phone sales to meeting license could be much higher actually. I know you've talked about it seeing kind of 1:1 before. What's the latest on what the upsell of Zoom Phone could be versus the Meetings space?

Yes. So typically, in most of our customers, it is 1:1. There certainly are examples where there is a larger need for Zoom Phone than Zoom Meetings licenses. One of that we've talked about as a use case on our call is Tapestry, which bought Zoom Phone and Zoom Meetings. So Tapestry owns brands like Coach, Kate Spade, and they had -- they bought Zoom Phone for both their -- sorry, Zoom Phone and Zoom Meetings for HQ, but they also bought Zoom Phone for their retail locations. So they needed phones in their stores, but they didn't really need meetings there. So that's a perfect example of where there is a greater use case in need for Zoom Phone than for Meetings. And it's not uncommon for there to be a few additional Zoom Phone licenses for common areas like receptionists or maybe cafeteria, conference rooms that might not have a meeting component to it yet, I think that's coming. But those are the situations where there might be a broader need for Zoom Phone than Zoom meetings.

And I'm going to put you on the spot a little bit once again because I had an investor ask me an interesting question the other day about have we seen examples of companies go the other way as well, decide to get totally rid of all phone numbers and just go all in with Zoom Meetings and just operate without phone numbers anymore. And I was hard-pressed to find an example or think of an example. But I'm curious, have you seen it go the other way where organizations are so happy with Zoom, they're able to get rid phone numbers?

I'll get back to you on that one, Daniel. I don't know of an example, but I don't want to say there isn't one. We certainly -- even before the pandemic, we had customers that were completely remote, and they never had offices, they never had physical locations. They ran their company on Zoom. What I don't know is that they run it on Zoom+, where they -- you're running it on Zoom Meetings and Zoom Phone or even before the advent of Zoom Phone, were they using something else, that we'd have to find out for you.

Yes. Understandable. The world is changing pretty rapidly related to this.

Yes.

So while we're on the topic, I see an investor question coming through about the competitive landscape. And I'm curious, who do you view as the top competitor? Is it Teams? Is it RingCentral? Is it the big legacy base out there that's slow to move? Who should investors view as your top competition?

Yes. I think the legacy base that is slow to move is creating opportunity for us. Think for the long term, the competitor and also the partner that we think the most about is Microsoft, absolutely. They -- we compete with them, but we also partner with them. And we do so -- first of all, having a competitor in this space makes us be better. We never take our position for granted. We're always trying to innovate and really believe that competition encourage us to do that. We do partner with Microsoft, though, as customers -- when we listen to them, they have told us that they want to be able to leverage part of our suite and part of theirs. And most commonly on the Teams side, it is the chat functionality, but they want to use Zoom Meetings and Zoom Phone. So there are integrations so that you can one click launch a Zoom Meeting or Zoom Phone from the Teams' user interface. You can also launch a Zoom Meeting from within a Microsoft-enabled conference room. So that -- those are some examples of how we're coming together to partner, but also competing.

Great. And I see some other questions coming in on contact center, and that was an area I wanted to go next. So I'm sure -- it seems like you guys get these questions every earnings call, every meeting. Contact center seems like a very natural place to move next. So just thinking about how important could contact center be for Zoom? And we see technologies like the Zoom Phone Power Pack that looks like it's getting close to contact center. So I guess, just help frame for investors, how much of this do you already do in-house? And how much of it do you choose to partner? And where do you see the strategy for contact center going?

So our current approach to contact center is that we partner, we -- partnering, we have great relationships with all of the providers, Five9, inContact, Genesys, Talkdesk. And we like this approach because it lets our customers choose. It lets them choose the product that works well for them and -- but integrate, again, seamlessly with Zoom Phone. Think about the way that we are thinking about the evolution of this. Contact center is an important part of the UCaaS strategy in general. And we -- I guess the way that -- as I've learned about this, the way I think about it is contact center is not one-size-fits-all. I mean there are differing requirements based on the size of the customer. And typically, it kind of is focused on SMB versus enterprise. Now some of the vendors that I just talked about, sell into both segments of customers, but sometimes you see a little more specialization. And I think as we continue down this path, what you should expect to see is a combination of approaches, meaning today, we partner across all of the segments of the business. And in the future, there might be a hybrid approach where we partner in certain segments of the business, but we either have acquired or developed our own solution that serves a different segment of the business. So Eric teased this a little bit on the earnings call, and I don't want to steal his thunder, so again, another reason why you should come to Zoomtopia in September and hear more about it.

Yes. That's great. Thanks for clarifying some of that. I know that mentioned on the earnings call, got a lot of attention from Eric there. So that's great. And then maybe to tie this all together a little bit, just M&A, I think that's another topic that I always ask you about. But how important is it for the strategy? What's the balance of enhancing areas you play today with internal development versus the ability to go after M&A and really accelerate the move into some of these new markets?

Yes. So M&A to date, we've only done 1. We were thrilled with the outcome, which is the Keybase team joining us last year to really accelerate our end-to-end encryption exercise. Thinking about it going forward, we are always looking for opportunities for expansion into areas that complements and continue to expand our platform strategy that we talked about at the very beginning. Our corp dev team has been really busy in terms of evaluating opportunities. And they could be -- they can continue to be expansions into either talent is what we did originally with Keybase or technology. But we have a very high bar for both. And then, of course, it's really important that any company we're evaluating is a good culture fit for us and that there's value there in terms of the price. And so when we look through all of those lenses, we've seen some great opportunities. We haven't quite found the right one. Yet, we continue to progress. And don't be surprised if you start to see more activity in this area from us later this year.

And Kelly, have you said anything about the size versus like your DNA? Is it safe to say that the DNA of Zoom is more tuck-in technologies and talent like you mentioned? And I don't want to put words in your mouth, but anything about size potentially?

Yes. I mean, I think it could be either, honestly. And we've looked at all different sizes of organizations. It really comes down to, I think, the criteria that I laid out at the beginning, which is, okay, does this technology or talent really help us and is it really bringing something to the organization? Is it a good culture fit? And is it a good value for where we're sitting at that point in time. And it could be, yes, smaller or easier to do, but we don't shy away from that or shy away from larger opportunities just because of the size. It's really more about what do we need in the longer-term platform strategy.

Great. Very helpful. And then -- and reminder for investors, keep feeding me questions, happy to kind of juggle going back and forth here. I wanted to switch gears and talk about your spending plans. And first on sales and marketing, I think consensus estimates have it nearly doubling in terms of the expense in fiscal '22 over '21? So can you help us frame a little bit about where the incremental sales and marketing dollars are going to go from here?

So there's 2 areas. The first one is really around sales capacity. So we had such an extreme top line growth last year, we were just not able to keep up with the hiring and are continuing to catch up now. And what the acceleration of our global brand awareness has done is really create an opportunity for hiring in markets that probably would have been years down the road from us -- for us. Because the way that we typically go into a new market is, first, we seed it with marketing dollars so that we don't hire salespeople and to a cold market. The global acceleration of our brand has really opened up markets like Latin America, for example, that probably would not have been on our road map for a few years. So you're going to see growth in international sales headcount grow at even a faster rate than U.S. headcount this year. There also is investment going into our international channel strategy. We talked about, in terms of Zoom Phone, the master agents being a really important part of that strategy. And we've worked it on, and we've kind of refined our U.S. channel program and have onboarded several master agents. We're really pleased with the progress we're making there. And now we're looking for the opportunity to expand that internationally. So those are kind of the 2 areas of investment around sales. And then on the marketing side, pre-pandemic, we really focused our marketing on brand awareness. You probably remember seeing airport banners or, if you're in the Bay Area, billboards and then sports team sponsorships. And we were fortunate enough that during the pandemic, there was such a global lift that we were able to stop most of that spending during the last 14, 15 months. Now we are reassessing and restrategizing around marketing spend and focusing it more on product marketing. So you're going to start to see more campaigns around specific products, including Zoom Phone, including things like Zoom Events and Zoom Apps. So those are the areas that you're going to continue to see sales and marketing spending increasing over the next several quarters.

That's very helpful. And maybe sticking with the expense and spending theme here, an interesting point brought up by investors post your quarter was that some were actually surprised that the R&D spending was actually lower than they had expected. And I'm just curious, is hiring generally going according to plan for R&D? Do you expect to pick up this year? Do you have any thoughts on that level right now?

Yes. Absolutely. So -- and thank you. R&D is a really important area of focus for us. It came in Q1 at 4.3%, which is -- our long-term target is 8% to 10%. So it's half of where we really want it to be for the long term. And that is also due to the fact that with the strong growth in revenue last year, we just haven't been able to keep up with the hiring. With all that said, spending quarter-over-quarter, so from Q4 to Q1, did grow by 33%. So that shows that our investment that we've made in the past few quarters in terms of our talent acquisition team and the expansion of our recruiting on a global basis is starting to work and starting to pay off. So this is absolutely an area of investment that we're really focused on. And we want it to be higher. So you're going to continue -- you should expect to continue to see that line item as a percentage of revenue to increase.

Fantastic. And it looks like we only have 1.5 minutes left. So maybe to close out, Kelly, can you talk a little bit about the smaller customer cohort, what you expect for growth in the second half of this year? And maybe you can just discuss a little bit about the OnZoom strategy if you think it fits as part of that answer because the consumer may move over to that at some point. That would be helpful.

So the customers with fewer than 10, as I remind everybody, pre-pandemic, were 20% of our revenue. And last quarter -- the last couple of quarters, they bounced between 36% and 37% of revenue. So extreme growth there. And they typically buy on a monthly contract. So this cohort has been the most volatile in terms of retention and reaction to markets reopening around the globe. The -- you mentioned OnZoom. So OnZoom was really conceived as an inspiration from all of the amazing use cases we saw coming out of this segment of customers. They're running businesses on it. And it can be from business classes to tutoring, to cooking class, dancing classes. Like you name it, we have seen it. And OnZoom is really a platform that allows them to bring together hosts and attendees in a seamless way as well as to serve as -- at a direct rate. Now what happened is as we were working on Zoom and really focus on this consumer and segment, we realized there was a significant opportunity in corporate events as well. And so we actually reprioritized in Zoom Events, which, again, we recently announced a few weeks ago is coming in advance of OnZoom. We decided to switch the priority. And Zoom Events, which is focused on corporate events, will be launching later this summer. And then OnZoom, which is more focused on the consumer and prosumer segment will be coming in the fall. So really excited about both of those. And one more time you could come to Zoomtopia and see what's that.

Perfect. It's a great place to end, and we're out of time. So Kelly, thanks so much for joining us. Tons of products to talk about here, we could go on forever, but we'll tune back in for Zoomtopia soon, looking forward to that.

Sounds great. Thanks for having us, Daniel.

Thanks, Kelly. Take care.